\u3000\u3000 Ningbo Orient Wires & Cables Co.Ltd(603606) (603606)
The company won the submarine cable order of Mingyang Yangjiang Qingzhou No. 4 project, and the bid winning price fell by limited compared with the rush loading period. On February 15, 2022, the company issued an announcement indicating the 220kV and 35kV submarine cable procurement and laying works of yangyangjiang Qingzhou four seas wind power project. The total amount of the two bid sections is about 1.390 billion yuan. Compared with the third project of Huadian Yangjiang Qingzhou (with a total amount of 1.297 billion yuan, excluding laying) bidding during the rush loading period in 2021, the decline in the bid winning price is limited, which dispels the market’s doubts about the sharp decline in the submarine cable price after the sea breeze rush loading to a certain extent. Under this price, it is expected that the profitability of the company’s submarine cable business will remain at a high level.
China’s sea breeze parity process has accelerated, and the head submarine cable manufacturers have fully benefited. Since the end of 2021, China’s affordable offshore wind projects have been advancing faster than expected. According to incomplete statistics, more than 8GW of affordable offshore wind projects have carried out wind turbine / EPC / foundation bidding. We expect that the construction scale of China’s offshore wind power projects is expected to exceed 10GW in 2022. Submarine cable is one of the best links in the pattern of Haifeng industrial chain. The head manufacturer has obvious advantages in technology, project experience and location layout. In the bidding of Yangjiang Qingzhou four submarine cables, the company’s quotation is about 14% higher than that of the second-line manufacturer, but it still won the order in the end, which fully reflects the deep barrier of the company as the head manufacturer. With China’s sea breeze going deep and far into the sea in the future, the voltage level, length and technical requirements of submarine cables will also be improved simultaneously, and the company’s competitive advantage is expected to further appear.
The company has abundant orders in hand and the new production capacity is gradually released. According to the disclosure in the quarterly report, as of 2021q3, the company’s submarine cable and offshore engineering orders in hand were 3.8 billion yuan. In addition, in 2022, the company has announced and disclosed that the new submarine cable orders were nearly 2 billion yuan. Considering that large-scale sea breeze projects such as CGN Yangjiang Fanshi, Yuedian Yangjiang Qingzhou 1 / 2 and Three Gorges Yangjiang Qingzhou 5 / 6 / 7 are expected to open submarine cable bidding successively in 2022, the company is expected to win more orders in the future. In terms of production capacity, the eastern (Beilun) base of the company will be fully put into operation in 2022, while the southern (Yangjiang) base has been started at the end of 2021. It is expected that the production capacity can be gradually formed in 2023. We believe that abundant orders on hand and comprehensive capacity layout will strongly support the company’s future performance.
Investment suggestion: we expect the company to achieve an operating income of RMB 8.581/96.44/12.521 billion and a net profit attributable to the parent company of RMB 1.311/14.05/1.907 billion respectively from 2021 to 23. The company is given a “Buy-A” investment rating for the first time. The six-month target price is RMB 71.51, corresponding to 35 times of 2022 P / E ratio.
Risk tips: the development of offshore wind power is less than expected, the price of raw materials rises, market competition intensifies, etc
